Solar Winners: GT Solar's Biggest Order Ever

(GT Solar story, updated for polysilicon market details)

NEW YORK (TheStreet) -- GT Solar (SOLR) shares are rising on Wednesday after the solar equipment vendor signed its largest polysilicon equipment deal -- and largest single deal in company history -- with South Korean polysilicon giant OCI.

OCI is paying $228 million for polysilicon reactors that will hit GT Solar's books in the first fiscal quarter of 2012.

GT Solar shares were up between 7% on Wednesday to a new 52-week high of $12.32, and had reached their average daily trading volume at the mid-day mark. Shares had hit a previous 52-week high of $12.13 on Monday.

"They are executing really well on grabbing new orders over the past few months and across all three business segments [solar furnaces, polysilicon reactors, and sapphire substrate]," said David Arcaro, analyst at Battleroad Research.

In terms of the OCI order, the Battleread Research analyst said the deal was not a surprise, though the pricing seemed attractive for GT Solar. OCI had previously announced plans to expand it polysilicon fabrication, and GT Solar has been its equipment supplier for a long time, though he noted that OCI had not named GT Solar as the polysilicon reactor supplier when it announced the plant expansion. OCI has already announced plans for a fifth-stage in its polysilicon facility expansion which will begin in 2013.

OCI also signed a sapphire substrate equipment order earlier this year with GT Solar, as it seeks to become a bigger player to the LED market, where sapphire is a core raw material for LEDs. GT Solar's entrance into the sapphire "arms race" has been noted as a competitive threat to LED market sapphire provider Rubicon Technology (RBCN), which has posted a string of recent quarterly beats, though in the most recent quarter did report pricing pressure in its primary sapphire wafer market.

On pricing, the $228 million price tag for the polysilicon reactors implies a price of $4.5 million per reactor, according to Battleroad Research, which would be at the high end of the $3 million to $5 million range at which polysilicon reactors sell.

The $228 million in revenue generated is also notable, equating to two quarters worth of polysilicon revenue for GT Solar, Arcaro noted. "New orders serve as catalysts for this stock," Arcaro said. The analyst added that between backlog and new orders, his GT Solar model implies GT Solar meeting revenue targets through March 2013. "That's nine quarters worth of revenue, but the stock is not reflecting that based on its multiple," the analyst contends. "The Street isn't giving GT Solar credit for fiscal 2013," he added. GT Solar is currently trading at 8 times the average analyst earnings estimate for 2012.

Stifel analyst Jeff Osborne raised his price target on GT Solar from $14 to $16 on Wednesday based on the added visibility and size of the backlog making the 2012 outlook seem conservative. The Stifel analyst noted that since the end of the third quarter, GT Solar has booked nearly $900 million in new orders primarily driven by the strength in sapphire and polysilicon equipment. Stifel estimates GT Solar's current backlog to be near $2billion (accounting for announced F4Q and F1Q bookings) or greater, and said the company's most recent fiscal 2012 guidance at $1.5 billion didn't appear to assume incremental fiscal 2012 sales from subsequent orders. "

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